System and method for integrating a dark trading facility and a securities exchange

ABSTRACT

A system and method are described for the providing securities exchange members increased liquidity for affecting trades. Securities exchange members will have access to both a Dark Trading Facility and securities exchange for trading. When trading on the security exchange, these members will be able to access the Dark Trading Facility using the security exchange infrastructure. Further, when such members enter orders onto the Dark Trading Facility, they will have access to the security exchange display book from the dark pool of the Dark Trading Facility. The trading transactions executed in the Dark Trading Facility or initiated by the Dark Trading Facility, preferably, are automatic and anonymous.

CROSS REFERENCE TO RELATED APPLICATIONS

This application is a continuation of U.S. patent application Ser. No.12/258,376, entitled System and Method for Integrating a Dark TradingFacility and a Securities Exchange, filed Oct. 24, 2008, now U.S. Pub.No. 2009/0210337, which claims the benefit under 35 U.S.C. §119(e) ofU.S. Provisional Application No. 60/982,290, filed Oct. 24, 2007, bothincorporated by reference herein in their entirety.

TECHNICAL FIELD

The present invention relates to systems and methods that are used forenhancing liquidity in fragmented markets with disparate single-purposevenues.

BACKGROUND OF THE INVENTION

In the United States and throughout the world there are traditionalexchanges for trading securities. In the United States these exchangeswould include the New York Stock Exchange, NASDAQ, and American StockExchange. In Asia, it would include the Australian Securities Exchange,Taiwan Stock Exchange, the Hong Kong Stock Exchange, Shenzhen StockExchange, Tokyo Stock Exchange, and Stock Market Division of KoreaExchange. In Europe, it would include the London Stock Exchange, ParisBourse, Frankfurt Stock Exchange, and SWX Swiss Exchange. In SouthAmerica, it would include the Rio de Janeiro Stock Exchange, SantiagoStock Exchange, Jamaica Stock Exchange, and Caracas Stock Exchange.Normally, each of these exchanges would be approved under theappropriate governmental laws and regulations, and organized so that itsmembers would be able to trade common stock in listed companies. Thesetraditional exchanges are called “Displayed Markets”. Displayed Marketsprovide price quotes for transactions on that venue to the market atlarge.

In recent years, dramatic increases in the capability of computer andtelecommunications technologies, changes to the organizational structureof large market participants as well as changes to the national marketstructure precipitated by regulatory changes have caused the emergenceand growth of a variety of electronic equity trading venues that captureorder flow. With barriers to entry in the industry substantially lower,innovative entrepreneurs are also able to offer traditional ordermatching and execution services faster, and cheaper providing certaintyof order fulfillment sooner. These trading venues consist ofinternalized order flow at broker-dealers, Electronic CommunicationNetworks (ECNs) and Alternative Trading Systems (ATSs). Many of thesevenues are also a “Non-Displayed Market” where buy and sell orders crosswithout the benefit of publicly available quotes. These Non-Displayedmarkets are commonly referred to as “dark pools” of liquidity.

While the proliferation of these liquidity pools expand investors'options in choosing a trading venue that best suits their needs for aparticular order, this growth has also caused market fragmentation. Theresult is that getting a large order executed without an impact to thesecurities market at large has become very difficult.

Until the present invention, traditional securities exchanges and darkpools (a/k/a Displayed and Non-Displayed Markets) have operated asseparate trading facilities.

Investors desire access to liquid, high quality markets, as well asspeed and certainty of execution without market dislocation. The presentinvention provides a solution to the problem by allowing Displayed andNon-Displayed to interact without a dislocation to the market.

SUMMARY OF THE INVENTION

The present invention is a system and method for participants (e.g.ATSs, ECNs, Exchanges, Broker-Dealers) in both Displayed andNon-Displayed markets to place orders in a dark trading facility that isconnected to a Public Display Market.

Exchange members will be able to access the Dark Trading Facility usingthe exchange infrastructure to place orders. Other market participantscan have a separate access to the Dark Trading Facility for conductingtransactions.

The Dark Trading Facility will act as both a matching engine and anorder router. As such, the Dark Trading Facility will have access toboth displayed and non-displayed orders on the security exchange andorders sent to it from participants. If the matching engine of the DarkTrading Facility identifies an opportunity trade with contra side ordersresiding in the Dark Trading Facility system database, it will executethe trade and record it through the securities exchange with a specialdesignation. The second type of trade that the Dark Trading Facilitywill be involved with is where the Dark Trading Facility identifies anopportunity for a trade between an order entered on the Dark TradingFacility from participants and the securities exchange display book. Inthese situations, the Dark Trading Facility will route that order to thesecurities exchange for execution, and the trade will be recordedthrough the securities exchange as a normal trading transaction.

The present invention creates a new type of trading venue that for thefirst time will allow display and reserve orders to interact with darkorders facilitating the execution of large transactions. Exchangemembers and participants can enter an order's volume and price, and theanalytical programs that run the venue continuously search its own darkbook as well as displayed and reserve orders executing the trade when itaggregates sufficient liquidity at the price point and printing it tothe exchange tape will be described in greater detail in a remainder ofthe specification referring to the drawings.

BRIEF DESCRIPTION OF THE DRAWINGS

FIG. 1 shows a block diagram of the system as of the present invention.

FIG. 2 shows a block diagram for describing trades carried out by theDark Trading Facility of the present invention.

FIG. 3 shows an exemplary NBBO and representative orders for describingtrades when there is a MTV designation for at least one order.

FIG. 4 shows an exemplary NBBO and representative snapshots of theSecurities exchange display book, rollup of prices, away markets, andDark Trading Facility system database.

FIG. 5 shows an exemplary set of order information that will be used fordescribing the handling of residual shares and modification of the MTV.

FIG. 6 shows an exemplary set of order information that will be used fordescribing order evaluation and allocation.

FIG. 7 shows an exemplary set of information that will be used fordescribing price/time priority preemption.

FIG. 8 shows an exemplary NBBO and representative orders for describingexecution priority and trade through of a protected quote.

FIG. 9 shows an exemplary NBBO and representative orders for describingthe operation of the Dark Trading Facility with regard to equal orbetter prices.

FIG. 10 shows an exemplary NBBO and representative orders for describingthe operation of the Dark Trading Facility when the Dark TradingFacility has the best price.

FIGS. 11A and 11B show exemplary NBBOs and representative orders fordescribing the operation of the Dark Trading Facility when orders crossin the Dark Trading Facility.

DESCRIPTION OF THE INVENTION

The present invention is a system and method for the integration of asecurity exchange and a dark pool so that authorized securities Traderswill have the ability to trade on either the Dark Trading Facility orthe securities exchange to provide the best venue for trading aparticular order, large block size or otherwise. The integration of asecurities exchange and Dark Trading Facility provides “Displayed” and“Non-Displayed” trading markets for Traders that are members of thesecurities exchange.

Securities exchange member orders submitted to the exchange will haveindirect access to orders entered on the Dark Trading Facility throughthe exchange infrastructure. These members also may decide to enterorders on the Dark Trading Facility so that it may trade anonymouslywithin the Dark Trading Facility or against orders listed on theexchange display book. For example, the Dark Trading Facility may be apreferred trading venue for large block trades which could adverselyimpact market price if such a trade were made visible on the securitiesexchange display book. Orders may also be split and part will be listedon the securities exchange display book and part entered on the DarkTrading Facility.

The following acronyms and definitions shall be used in describing thesystem and method of the present invention:

ACRONYMS AND DEFINITIONS

“DBK” means a securities exchange display book.

“ISE” means International Securities Exchange.

“MTV” means minimum triggering volume quantity.

“MPV” means minimum price variation.

“NBBO” means National Best Bid and Best Offer.

“PHLX” means Philadelphia Stock Exchange.

“PRL” means partial round lot.

“TIF” means time in force condition.

“Limit Order” means an order that is executed within a specified rangeof prices.

“Market Maker” means a professional securities dealer or person thatstands ready to buy and sell a particular stock on a regular andcontinuous basis at a publicly quoted price.

“Market Order” means an order to buy or sell securities immediately atthe best price obtainable in the market.

“NMS” (National Market System) means a centralized system for reportingtransactions and quotations from all qualified market makers, such asthe NASDAQ.

“Protected Bid” or “Protected Offer” means a quotation in an NMS stockthat: (i) is displayed by an automated trading center; (ii) isdisseminated pursuant to an effective NMS plan; and (iii) is anautomated quotation that is the best bid or best offer of a nationalsecurities exchange or a national securities association.

“Securities Exchange Trade-Through” is an event that occurs when amember on the securities exchange initiates the purchase of a securitytraded through an ITS (an ITS Security) at a price that is higher thanthe price at which the security is being offered (or initiates a sale onthe securities exchange of such a security at a price that is lower thanthe price at which securities are being bid for) at the time of thepurchase (or sale) to another ITS participating markets center asreflected by the offer (bid) then being displayed on the securitiesexchange which from such other markets center.

“Third Participating Market Center Trade-Through” is an event thatoccurs when a member on the securities exchange initiates the purchaseof a security by sending a commitment to trade through the system andsuch commitment results in an execution at a price that is higher thanthe price at which the security is being offered (or initiates the saleof such a security by sending a commitment to trade through the systemand such commitment results in an execution at a price that is lowerthan the price at which the security is being bid for) at the time ofthe purchase (or sale) in another participating market center asreflected by the offer (bid) then being displayed on the securitiesexchange from such other market center.

“Trade-Through” means the completion of an order at a price inferior tothe best posted bid or offer. For example, the market maker who receivedthe order is unable or unwilling to fill the order at the best postedbid or offer price, and as a result, the trade is instead executed atthe Market Maker's price.

“Dark Trading Facility Day Order or “Day Order” means an order that ifnot executed, expires at the end of the regular trading session of theday on which it is entered. If the order is not executed by the end ofthe regular trading session, the order or a portion thereof not executedwill be canceled back to the Dark Trading Facility User.

“Dark Trading Facility GTT Order” (Dark Trading Facility Good Till aSpecified Time Order) means an order that is available for trading untila specified time, after which the order or the portion thereof notexecuted will be canceled back to the Dark Trading Facility User.

“Dark Trading Facility IOC Order” (Dark Trading Facility Intermediate orCancel Order) means a limit order that is to be executed in whole or inpart as soon as such order is entered into the Dark Trading Facility,and the entire order or portion thereof not executed will be canceledback to the Dark Trading Facility User.

“Dark Trading Facility IOS IOC Order” (Dark Trading Facility IntermarketSweep Intermediate or Cancel Order) means an order that is sent by theDark Trading Facility to the securities exchange DBK which will executeagainst all available contra side liquidity on the securities exchangeDBK to the fullest extent possible. If a residual order remains, aresidual order will be returned to the Dark Trading Facility where itwill remain until it executes against additional contra side liquidityor be canceled back to the Dark Trading Facility User without routing toother automated trading centers for execution.

“Dark Trading Facility Market Pegging Order” means a market order thatis pegged to buy at the national best offer (NBO) or sell at thenational best bid (NBB) plus or minus the securities exchange MPV.

“Dark Trading Facility Midpoint Pegging Order” means an order with aninstruction to peg to the midpoint of the NBBO.

“Dark Trading Facility Primary Pegging Order” means an order that ispegged to buy at the NBB or sell at the NBO plus or minus the securitiesexchange MPV.

“Dark Trading Facility User” means any member or member organization,sponsoring member organization, or sponsored participant at authorizedtrader that is authorized to access the Dark Trading Facility throughthe securities exchange or authorized to directly access the DarkTrading Facility.

Referring to FIG. 1, generally at 100, a block diagram of the system ofthe present invention is shown. The system of the present inventionincludes Dark Trading Facility 102 and securities exchange 130. Asshown, Dark Trading Facility 102 connects to securities exchange 130 viaelectronic communications link 116.

Preferably, Dark Trading Facility 102 will include an order router 104for routing orders from the Dark Trading Facility to securities exchange130. Dark Trading Facility 102 also includes matching engine 106 that isused for executing matches between orders newly entered on the DarkTrading Facility from Traders and orders stored in Dark Trading Facilitysystem database 108. Since the Dark Trading Facility has access to thesecurities exchange DBK and away markets, the matching engine canidentify trading opportunities in these markets and will route orders tothe securities exchange and may also route to away markets using orderrouter 104 to affect trades.

Preferably, Dark Trading Facility 102 will process orders that areconfirmed for automatic execution. However, it is understood that otherorders execution methods may be used by Dark Trading Facility 102 andstill be within the scope of the present invention.

Referring to FIG. 1, a plurality of Traders are shown connected tosecurities exchange 130 and also Dark Trading Facility 102. These areshown as Trader 1 at 132, Trader 2 at 134, and Trader 3 at 136.Preferably, these Traders are securities exchange members that haveaccess to the securities exchange and the Dark Trading Facility fortransacting trades. Traders 1, 2, and 3 may be broker-dealers, otherexchanges, e.g., the NASDAQ, Alternative Trading Systems (ATSs),Electronic Communications Network (ECN). The purposes of the presentinvention a “Trader” may be any entity authorized to trade securitiesand such entity will be within the scope of the present invention.

The transmission of orders from Trader 1 at 132 via electroniccommunications link 118, Trader 2 at 132 via electronic communicationslink 120, and Trader 3 at 136 via electronic communications link 122 toDark Trading Facility 102 are unidirectional communications.

Referring to securities exchange 130, it will maintain a securitiesexchange DBK that will include displayed and reserve (non-displayed)amounts for securities. Securities exchange 130 has one or a pluralityof Traders connected to it that is (are) qualified in accordance withthe appropriate securities regulations and governing laws to trade onthe securities exchange. Dark Trading Facility 102 has access to thesecurities DBK via bidirectional electronic communications link 116 thatconnects between API 114 of the Dark Trading Facility and API 150 of thesecurities exchange. Trader 1 at 132, Trader 2 at 134, and Trader 3 at136 are only meant to be representative qualified Traders connected tothe security exchange for transacting trades.

Order information on the securities exchange DBK is transmitted to DarkTrading Facility 102 via bidirectional electronic communications link116 for the purpose of providing greater liquidity for matching theorders on the securities exchange DBK. If matching engine 106 of DarkTrading Facility 102 identifies a contra side trading opportunity on thesecurities exchange DBK, it will route the appropriate order that isposted or stored in Dark Trading Facility system database 108 tosecurities exchange 130 via bidirectional electronic communications link116. The securities exchange 130 will execute the trade and this tradewill be recorded on XE tape 138.

As shown in FIG. 1 (or FIG. 2), Dark Trading Facility 102 may includeinterface 112, including an application programming interface (API), towhich electronic communications links 118, 120, and 122 will connect.The orders transmitted from Traders 1, 2, and 3 to Dark Trading Facility102 will be processed by this API.

Also as shown in FIG. 1 (or FIG. 2), Dark Trading Facility 102 mayinclude interface 114, including an API, to which electroniccommunications link 116 will connect. The order information transmittedfrom securities exchange 130 and orders transmitted from the DarkTrading Facility to the securities exchange will be processed by thisAPI.

Further, as shown in FIG. 1 (or FIG. 2), securities exchange 130 mayinclude interface 148, including an API, to which Trader 1 at 132,Trader 2 at 134, and Trader 3 at 136 will connect via communicationslinks 140, 142, and 144, respectively. The orders transmitted from theseTraders to the securities exchange will be processed by the API.

Lastly, as shown in FIG. 1 (or FIG. 2), securities exchange 130 mayinclude interface 150, including an API, to which electroniccommunications link 116 will connect. The order information and ordertransmitted on this link will be processed by this API. It is understoodthat electronic communications links 116, 118, 120, 122, 140, 142, and146 may be wired or wireless communications links and still be withinthe scope of the present invention.

Referring to FIG. 2, generally a 200, a general description of thetrades carried out by or through Dark Trading Facility 102 will beprovided. Preferably, Traders 1, 2, and 3, will transmit block sizeorders or other orders desired to be traded in a dark liquidity pool toDark Trading Facility 102 via electronic communications links 118, 120,and 122 for the purpose of finding matching contra side orders. Thisprovides trading opportunities for Traders away from the securitiesexchange DBK.

For purposes of illustration, according to FIG. 2, contra side buy andsell orders from Traders 1, 2, and 3 will be posted and stored in systemdatabase 108. Buy orders are posted or stored at section 202 and sellorders at section 204. However, it is understood that other methods ofposting and storing buy and sell orders may be used and still be withinthe scope of the present invention. For example, buy and sell orders maybe cached upon entry for immediate matching and/or stored in variousmethods for presentation for matching and still be within the scope ofthe present invention.

When trades are executed within Dark Trading Facility 102 between contraside orders posted or stored in buy orders section 202 and sell orderssection 204, a record of these transactions will be transmitted tosecurities exchange 130 and recorded on tape 138. However, the recordsof these trades will have a special designation when recorded on tape138 to distinguish them from normal trades that are executed bysecurities exchange 130.

Display book 206 of securities exchange 130 has access via bidirectionalcommunications link 116 to the block size or other size orderstransmitted to Dark Trading Facility 102 from Traders 1, 2, and 3, andposted or stored in system database 108. If matching engine 106identifies a trading opportunity between the posted or stored orders inDark Trading Facility system database 108 and contra side orders on thesecurities exchange DBK, the matching engine will cause such posted orstored orders to be routed to the securities exchange for trading andexecution, and the trade will be recorded on tape 138 of securitiesexchange 130.

Preferably, trades that are executed on Dark Trading Facility 102 orinitiated based on orders routed to securities exchange 130 or awaymarkets will be traded automatically and anonymously. Although thetrades executed in the Dark Trading Facility or initiated by it areautomatic and anonymous, upon execution of a trade, the contra sideparties will be notified of trade execution in a manner that theirrecords can be updated yet preserve the anonymity of such contra tradingparties.

Dark Trading Facility 102 is also provided via bidirectional electroniccommunications link 140 with information about away markets. If afterany opportunities to trade with the securities exchange DBK and withinthe Dark Trading Facility system database according to the operatingrules of the Dark Trading Facility have been exhausted there remainadditional trading opportunities in away markets. Preferably, DarkTrading Facility 102 will route the applicable orders through securitiesexchange 130 to the appropriate away market. The executed trade will bereported on XE tape 138 or otherwise in a conventional manner fortrading with away markets.

Now that a general description of the operation of the system of thepresent invention has been provided, a more detailed description of theintegration of Dark Trading Facility 102 and securities exchange 130will be provided. This description will include the preferable operatingmethods for the present invention.

In the preferred embodiment of the present invention, Dark TradingFacility 102 permits securities exchange members, such as Traders 1, 2,and 3, to have an additional sources of liquidity without adverselyaffecting market trading conditions, such as making large block sizetrades that may not have been previously available to them on thesecurities exchange in an integrated manner. Dark Trading Facility 102also will permit securities exchange members (Traders 1, 2, and 3) toexecute smaller orders than block size orders on the Dark TradingFacility, and permit them to have access to multiple price points ofdisplayed liquidity to meet size and price execution requirements.Further, Dark Trading Facility 102 will permit securities exchangemembers (Traders 1, 2, and 3) to have multiple sources to automaticallyand anonymously trade their large block size orders or other orders.Shares from these multiple sources along with shares posted and storedin the Dark Trading Facility can be aggregated and traded against eachnew order entered on the Dark Trading Facility.

Dark Trading Facility 102 will permit orders transmitted to the DarkTrading Facility from Traders 1, 2, and 3 to interact with the aggregateof displayed and reserve (non-displayed) orders on the securitiesexchange DBK and the marketable liquidity in away markets. Preferably,Dark Trading Facility 102 will evaluate trades considering the depth andaway markets including protected quotes (protected bids or protectiveoffers) of all automated trading centers listed on the securityexchange. Also preferably, Dark Trading Facility 102 will trade onlywith respect to securities that are listed on security exchange 130.However, it is understood that other securities may be traded consistentwith applicable laws, regulations, and rules.

The operating times of Dark Trading Facility 102 may follow theoperating times of security exchange 130. However, since the DarkTrading Facility can operate 24 hours a day, to the extent that thehours of operation of securities exchange 130 increase to 24 hours aday, Dark Trading Facility 102 can operate 24 hours a day.

As described previously, preferably, Dark Trading Facility 102 is ananonymous trading system. As such, there will be no informationdisplayed to the public or to the securities exchange members about thesecurities that are available for trading on the Dark Trading Facility.Further, clearance and settlement of trade executions occurring on orinitiated by Dark Trading Facility 102 will be anonymous. However, atrade report will be generated after each trade execution to notify theinvolved parties of the consummation of a trade involving their securityso their records may be updated.

Preferably, each Dark Trading Facility User is a securities exchangemember and as such, will be authorized to access Dark Trading Facility102. A Dark Trading Facility User may enter orders on their own behalfor on behalf of clients/customers. It is understood, that there may bedefined requirements and rules to be followed for a person, firm, orentity, to qualify as a Dark Trading Facility User.

As stated, Dark Trading Facility Users, such as Trader 1 at 132, Trader2 at 134, and Trader 3 at 136, will make their orders available on DarkTrading Facility 102, for automatic matching and execution. Preferably,the orders that Dark Trading Facility 102 will accept and execute,include, but are not limited to, limit orders, Dark Trading Facility IOCorders, Dark Trading Facility ISO IOC orders, and Dark Trading FacilityNBBO Pegging Orders. Dark Trading Facility NBBO Pegging Orders include,but are not limited to, Dark Trading Facility Midpoint Pegging Orders,Dark Trading Facility Primary Pegging Orders, and Dark Trading FacilityMarket Pegging Orders. Preferably, all orders that are accepted by DarkTrading Facility 102 will have a minimum share size of round lots orPRLs. Although Dark Trading Facility 102 is capable of accepting MarketOrders for trading and execution, preferably, such Market Orders are nottraded on the Dark Trading Facility.

Preferably, each order that is accepted by Dark Trading Facility 102 forexecution will include at least the following parameters: securitysymbol; limit price; side, e.g., buy, sell, short sell; and size of theorder. However, it is understood that each order may be required to havemore or less than the parameters just named and still be within thescope of the present invention.

A Dark Trading Facility User may also include other parameters as partof the order. For example, a TIF may be added to the order. If thisparameter is added and the order is not matched and executed to meet theTIF, the order will be canceled. Preferably, if a Dark Trading FacilityUser does not designate a TIF for a given order, the order will betreated as a Dark Trading Facility Day Order and be canceled at the endof the trading day of the securities exchange if it is not matched andexecuted by that time.

Another parameter that a Dark Trading Facility User may choose to add toa specific order is a MTV designation. The MTV parameter will be aminimum amount of shares of a security against which an order willattempt to execute if there is sufficient contra side liquidityavailable on Dark Trading Facility 102 at the designated price.Preferably, the MTV may be determined (i) based on all contra sideliquidity and protected quotes of all automated trading centers or (ii)based only on the contra side liquidity on the Dark Trading Facility 102and the depth of the securities exchange DBK. Either determination maybe used and still be within the scope of the present invention. If theDark Trading Facility User does not include a MTV parameter with anorder, the order will be matched and executed with any available contraside liquidity available to Dark Trading Facility 102. Further, if theDark Trading Facility User includes an MTV parameter with an order butdoes not indicate which of the two types it is designating, the DarkTrading Facility will default to all available contra side liquidity andthe protected quotes of all automated trading centers.

Although protected quotes are referred to in the present example, it isunderstood that the depth of the away markets could be considered andstill be within the scope of the present invention.

When an order is entered on the Dark Trading Facility 102 from Trader 1at 132, Trader 3 at 134, or Trader 3 at 136 with an MTV designation, adetermination must be made whether the MTV is met before any trading cantake place. If it is not met, the order with this designation will bestored in the Dark Trading Facility until it is met or the order iscancelled. Referring to FIG. 3, an exemplary evaluation of whether anMTV for an order is met will be described.

Referring to FIG. 3, generally a 300, an exemplary NBBO and exemplaryDark Trading Facility, securities exchange DBK, and away market ordersare shown for determining if the conditions of any MTV are met. Thedetermination of the MTV in accordance with FIG. 3 will be based on allcontra side liquidity in the Dark Trading Facility and the securitiesexchange DBK and the protected quotes of all automated trading centers.More specifically, the determination of whether the MTV condition is metwill review the contra side liquidity of the Dark Trading Facility, thesecurities exchange DBK depth of book, and the protected quotations fromall automated trading centers.

Again referring to FIG. 3, at 302, the NBBO is shown for a particularsecurity. According to the NBBO, the national best bid (NBB) is 122.20on the ISE for 5,000 shares and the national best offer (NBO) is 122.26on the PHLX for 10,000 shares.

Sell order section 204 of system database 108 includes Dark TradingFacility Order No. 1 shown at 304, which is a sell order for 5000 sharesat a price of 122.25. Securities exchange DBK 206 (FIG. 2) includes asell order for 5000 shares at a price of 122.26. The Philadelphiaexchange (PHLX), an away market, includes a sell order for 10,000 sharesat a price of 122.26.

Dark Trading Facility Order No. 2 is entered on Dark Trading Facility102 by Trader 1, Trader 2, or Trader 3 for 100,000 shares at a price of12.26 with a MTV of 7000 Day Order. There must now be a determinationwhether this buy order can be traded. Thus for MTV purposes, there mustbe at least 7000 shares at a price marketable or better than thedesignated price of 122.26 available to trade to meet the MTV condition.

From FIG. 3, the contra side orders available for Dark Trading FacilityOrder No. 2 to measure its MTV against are Dark Trading Facility OrderNo. 1 for 5000 shares and Securities Exchange Order No. 1 for 5000shares. The PHLX Order for 10,000 shares, a protected offer from an awaymarket, is aggregated with the previously described 10,000 shares. It isunderstood that the 10,000 shares on the PHLX may consist of one or moreorders on the PHLX. The prices of these three sell orders are allmarketable or better than the designated price of 122.26 so all areproperly aggregated to determine if the MTV is met or referred to as theMTV being triggered. As such, there are 20,000 shares available for theMTV determination, so the MTV is triggered since only 7000 shares wererequired.

Once the MTV is triggered, there will be an allocation of shares forautomatic and anonymous trading and execution. Trading Faculty 102 willsend 95,000 shares of the Dark Trading Facility Order No. 2 buy order tosecurities exchange DBK 206 for trading and execution at a price of122.26 ISO IOC. The Dark Trading Facility will also execute a tradeinternally for 5000 shares between the Dark Trading Facility Order No. 1sell order and the Dark Trading Facility Order No. 2 buy order at aprice of 122.25. However, no shares should be routed to protected quotesof the away markets to fill the PHLX Order(s) for 10,000 shares becauseit will not trade through the PHLX under these conditions. Also, noshares will be routed to the PHLX because the order had the ISO IOCdesignation that accompanied the shares sent to the securities exchangeDBK thus, any residual shares are to be returned without being routed tothe away markets.

With regard to the 95,000 shares of the Dark Trading Facility Order No.2 buy order that were routed to the securities exchange, 5000 sharesfilled the securities exchange DBK 5000 share sell order at a price of122.26 and 90,000 shares were returned to buy order section 202 of thesystem database 108 as the unfilled balance of the Dark Trading FacilityOrder No. 2 order at 122.26 with an MTV of 7000 shares.

Dark Trading Facility 102, preferably, is configured to act upon marketand order information that is available to it at the time an order isentered into the Dark Trading Facility. Therefore, at the time an orderis entered onto Dark Trading Facility 102 by a Trader, the Dark TradingFacility takes a “snapshot” of the market for a particular security.Preferably, this snapshot includes all orders for that security in DarkTrading Facility database 108, all displayed and non-displayed orders onsecurities exchange DBK 206, and protected quotations on automatedtrading centers (away markets). The orders that are part of the snapshotwill be what the newly entered order from a Trader will trade against.Referring to FIG. 4, an example is provided for describing how the DarkTrading Facility snapshot coordinates order execution and the allocationof shares.

Referring to FIG. 4, generally at 400, the description of an exemplarysnapshot will be provided of the market for a security when an orderfrom a Trader is entered onto Dark Trading Facility 102. Again referringto FIG. 4, the NBBO range shown at 402 is 101.10 to 101.15. At 404, asnapshot of security exchange DBK 206 is shown. At 406, the buy volumesfor reserve and display shares are shown. At 408, the sell volumes fordisplay and reserve shares are shown. At 410, the prices for the variousbuy and sell volumes are shown.

At 416, a snapshot of the rollup of displayed and reserved(non-displayed) shares on the securities exchange DBK are shown. At 418,the total rolled up buy volumes are shown and the total rolled up sellvolumes are shown at 420. At 422, the prices for the rollup buy and sellvolumes are shown.

At 428, the snapshot of the away markets for the security at issue isshown. The representative away markets are shown at 430. The volumes forthese away markets at the NBB are shown at 436 and at the NBO are shownat 438.

Finally, at 440, the snapshot of the market for the security interest inthe Dark Trading Facility system database is shown. At 442, the buyvolume is shown and at 444, the sell volume is shown. The prices ofthese volumes are shown at 446.

It is understood that the NBBO and snapshots of the market for aparticular security on the securities exchange DBK, rollup of prices,away markets, and Dark Trading Facility system database that are shownin FIG. 4 are meant to be representative only and may differ in amountsand prices and still be within the scope of the present invention.Further, there may be greater numbers of buy and sell volumes andparticipants in the away markets in the snapshot and still be within thescope of the present invention.

In processing orders, Dark Trading Facility 102 will have situationswhere there will be remaining shares that have not been matched.According to the operation of Dark Trading Facility 102, these remainingshares, referred to as residual shares, will be stored in theappropriate section of system database 108 until later matched or theorder is cancelled. However, if the residual share balance of an orderthat has being returned to Dark Trading Facility system database is lessthan the original MTV of the order, the MTV will be automaticallyadjusted to equal the residual share balance. When this happens, theorder will continue to execute with available liquidity when and if theadjusted MTV can be met. Referring to FIG. 5, an example of processingresidual shares and modification of the MTV will be described.

Referring to FIG. 5, generally at 500, an exemplary set of orderinformation is provided for describing the handling of residual sharesand modification of the MTV. At 502 of FIG. 5, a representative order isentered onto Dark Trading Facility 102 from a Trader, which is a buyorder for 100,000 shares with an MTV of 50,000 shares at a price of101.20. The snapshot of the market with which this new order will becompared will be based on the snapshot shown in FIG. 4.

The depth of securities exchange DBK 404 includes the displayed andreserved orders that have been rolled up as shown at 416 of FIG. 4. Thisamount is 54,000 shares, which is shown at 504 of FIG. 5. The awaymarkets, as shown at 428 of FIG. 4, are 4600 shares at 101.15 (the NBO),which is shown at 506 of FIG. 5. The other Dark Trading Facility ordersshown at 440 are 10,000 shares at 101.16, which is shown at 508 in FIG.5.

Given the aggregate number of shares from the depth of the securityexchange DBK, away markets, and other Dark Trading Facility orders is68,600 shares at the marketable price or better than 101.20, the MTV of50,000 shares at 101.20 was met at the time the order shown at 502 ofFIG. 5 was entered. Dark Trading Facility 102 will send a buy order for90,000 shares to the securities exchange DBK at a price of 101.20.Securities exchange 130 will execute trades for 54,000 shares. This willinclude 3500 shares at 101.15, 800 shares at 101.16, 5000 shares at101.17, 8000 shares at 101.18, 16,000 shares at 101.19, and 20,700shares at 101.20. Securities exchange 130 will also route ISO IOC ordersto away markets. In accordance with the example, this will mean that4,600 shares will be routed to the away markets at a price of 101.15.This will mean that 31,400 will be returned to the Dark Trading Facilityas residual shares.

Dark Trading Facility 102 will execute a trade for 10,000 shares at101.16 between the buy order that was just entered and the sell volumethat was in the Dark Trading Facility system database. Given all of theexecuted trades, there will be 31,400 residual shares left in the DarkTrading Facility system database from the original 100,000 share buyorder and the new MTV will be adjusted to equal this residual shareamount at a price of 101.20.

Preferably, Trade Facility 102 will be operated to permit automated andanonymous trade executions to occur within, at, and through the NBBO.However, Trade Facility 102 will protect the bids and offers on thesecurities exchange DBK that are at the same price or better than theNBBO and protected quotations, protected bids or offers, on away markets(automated trading centers). The protected bids and offers on thesecurities exchange DBK will include the depth of the displayed andnon-displayed (reversed, see FIG. 4) orders. Moreover, Dark TradingFacility orders, preferably, will be evaluated on a price/time prioritybasis to determine whether such orders are eligible to execute againstavailable contra side liquidity based on the price and the MTV of theorders. These features will be shown in describing FIG. 6.

In executing trades, Dark Trading Facility also considers whetherlatency may occur when trading entities evaluate liquidity on other awaymarkets or when orders are routed to such other away markets. An exampleof how this latency consideration is treated also is shown in describingFIG. 6.

Referring to FIG. 6, generally at 600, an exemplary set of orderinformation is provided for demonstrating determining order evaluationand allocation. At 602 of FIG. 6, a representative order is entered ontoDark Trading Facility 102 by Trader 1, 2, or 3, which is a buy order for200,000 shares with a MTV of 100,000 shares at 101.21. The snapshot ofthe market with which this new entering order will be compared will bebased on the snapshot shown in FIG. 4. Accordingly, the depth ofsecurities exchange DBK 404 at a price of 101.21, which includes thedisplayed and reserved orders that have been rolled up, is shown at 416of FIG. 4. This amount is 96,000 shares, which is shown at 604 of FIG.6. The away markets, as shown at 428 of FIG. 4, are 4600 shares at101.15 (the NBO), which is shown at 606 of FIG. 6. The other DarkTrading Facility orders, as shown at 440 of FIG. 4, are 10,000 shares at101.16, which is shown at 608 in FIG. 6.

Given the aggregate number of shares from the depth of the securityexchange DBK, away markets, and other Dark Trading Facility orders is110,600 shares at the marketable price or better than 101.21, the MTV of100,000 shares at 101.21 is met at the time the order shown at 602 ofFIG. 6 was entered. Dark Trading Facility 102 will send the buy orderfor 190,000 shares to the securities exchange DBK at a price of 101.21.Securities exchange 130 will execute trades for 96,000 shares. This willinclude 3500 shares at 101.15, 800 shares at 101.16, 5000 shares at101.17, 8000 shares at 101.18, 16,000 shares at 101.19, 20,700 shares at101.20, and 42,000 shares at 102.21. Securities exchange 130 will alsoroute 4600 shares to the away markets at a price of 101.15. When theDark Trading Facility ISO IOC orders are sent to the away markets, allare returned with fills except in the 1000 shares for the NASDAQ order.The NASDAQ order was not filled because of the latency associated withthe time the snapshot was taken and the time the order was routed to theaway markets for execution. During this latency period, the order mayhave been filled by another contra side order from another marketparticipant or it could have been cancelled, and that is why it is nolonger available for filling.

Dark Trading Facility 102 will execute a trade for 10,000 shares at101.16 between the buy order that was just entered and the sell volumethat was in the Dark Trading Facility system database. Given all of theexecuted trades, there will be 90,400 residual shares left in the DarkTrading Facility system database from the original 200,000 share buyorder and the new MTV will be adjusted to equal this residual shareamount at a price of 101.21.

When orders are entered into Dark Trading Facility 102, these orders areplaced in price/time priority according to the preferred orderparameters. Again, preferably, these parameters are security symbol;limit price; side, e.g., buy, sell, short sell; and size of the order.It is understood that other parameters may be used for determining theprice/time priority, such as MTV, TIF, etc. Price/time prioritysequencing may be affected and/or preempted in the allocation of orderswhen such orders have different order parameters, such as size and MTVdesignations. Referring to FIG. 7, an example of price/time prioritypreemption will be described.

Referring to FIG. 7, generally a 700, an exemplary NBBO and four ordersentered in time sequence on Dark Trading Facility 102 are shown. At 702,the market is shown with an NBBO of 20.00 to 20.05 for 1000 shares tobuy or sell ABC security, respectfully. The pricing of each of the foursequenced orders that is listed in FIG. 7 is pegged at the midpoint ofthe NBBO.

As shown at 704, Order No. 1 is entered on the Dark Trading Facility attime 1:00:00 and this order is a buy order for 100,000 shares of ABCsecurity with MTV of 100,000 shares. As shown at 706, Order No. 2 isentered on Dark Trading Facility 102 at time 1:05:00 and this is a sellorder for 25,000 shares of ABC security with a MTV of 25,000 shares.However, there can be no executions between Order No. 1 and Order No. 2because the MTV of Order No. 1 has not been met.

As shown at 708, at time 1:10:00, Order No. 3 to sell 50,000 shares ofABC security with a MTV of 50,000 shares is entered on Dark TradingFacility 102. However, there can be no executions between Order No. 1and Order No. 3 because the MTV of Order No. 1 has not been met by theaggregate of Order Nos. 1 and 2.

As shown at 710, at time 1:18:00, Order No. 4 to sell 100,000 shares ofABC security with the MTV of 100,000 shares is entered on Dark TradingFacility 102. However, there can be an execution between Order No. 1 andOrder No. 4 because the MTV of Order No. 1 has been met by the aggregateof Order Nos. 2, 3, and 4. Order No. 4 will trade against Order No. 1because upon entry it alone met the MTV condition of Order No. 1, andwill preempt Order Nos. 2 and 3 in the order sequence because of theinability of Order Nos. 2 and 3 to meet the MTV condition.

Dark Trading Facility 102 will execute orders in a predeterminedpriority. Preferably, first, the Dark Trading Facility will review theavailable contra side liquidity at the Dark Trading Facility order'slimit/pegged price on the securities exchange DBK. This will includedisplayed and non-display (reserved) liquidity. Second, the Dark TradingFacility will review the available contra side liquidity in the DarkTrading Facility system database at the Dark Trading Facility order'slimit/pegged price. Third, the Dark Trading Facility will review theavailable contra side liquidity of all protected bids and offers on theaway markets at the Dark Trading Facility order's limit/pegged price.However, Dark Trading Facility orders will not trade through anyprotected bids or offers. Referring to FIG. 8, any description forexecution priority and trade through a protected quote will be provided.

Referring to FIG. 8, generally at 800, an exemplary NBBO and set oforders are shown that will be used for describing the execution priorityand trade through of a protected quote. At 802, the NBBO is shown for aparticular security. According to the NBBO, the national best bid (NBB)is 122.20 on the ISE for 5000 shares and the national best offer (NBO)is 122.26 on the PHLX for 10,000 shares. At 804, Dark Trading FacilityOrder No. 1, which is a sell order for 5000 shares at a price of 122.26with no MTV, is shown. At 806, Securities Exchange DBK Order No. 1,which is a sell order for 5000 shares at a price of 122.27, is shown. At808, the PHLX Order is shown, which is a sell order for 10,000 shares ata price of 122.26. At 810, Dark Trading Facility Order No. 2 that hasbeen newly entered on Dark Trading Facility 102 is shown, which is a buyorder for 100,000 shares at a price of 122.27 with no MTV. From this setof orders and the NBBO, Dark Trading Facility 102 will allocate 10,000shares to PHLX, 85,000 shares to the securities exchange DBK, and 5000shares within the Dark Trading Facility.

In more detail, given the execution priority described above, DarkTrading Facility Order No. 2 that has just been entered will send 85,000shares to the securities exchange DBK at 122.27 ISO IOC. Dark TradingFacility Order No. 2 will execute a trade 5000 shares with theSecurities Exchange DBK Order No. 1 at 122.27. Dark Trading FacilityOrder No. 2 will execute a trade of 5000 shares with Dark TradingFacility Order No. 1 at 122.26. Dark Trading Facility Order No. 2 routes10,000 shares to PHLX of the away markets at 122.26 ISO IOC. The 10,000shares routed to PHLX will fill the PHLX Order.

After the trade is executed in the securities exchange for 5000 shares,the residual 80,000 shares are sent back to Dark Trading Facility 102where they will be posted in the buy section of the Dark TradingFacility system database at a price of 122.27. As shown in this example,the price for the PHLX Order was protected.

According to the preferred operation of Dark Trading Facility 102, ifcontra side liquidity in the securities exchange DBK is priced equal toor better than liquidity in the Dark Trading Facility, the order enteredon the Dark Trading Facility will be sent to the securities exchange inthe form of an ISO IOC order. If the order sent to the securitiesexchange DBK is not fully executed against the securities exchange DBK,the securities exchange will route the residual shares back to the DarkTrading Facility with a new MTV, when applicable, where it will interactwith the contra side liquidity in the Dark Trading Facility systemdatabase or be posted until it executes against new contra sideliquidity or be canceled back to the Dark Trading Facility User withoutrouting to away markets for execution. Referring to FIG. 9, adescription will be provided directed to the operation of the DarkTrading Facility where there are equal or better prices at thesecurities exchange DBK.

Referring to FIG. 9, generally at 900, an exemplary NBBO and a set oforder information are provided for describing operation of the DarkTrading Facility with regard to equal or better prices being availableat the securities exchange DBK. At 902, the NBBO is shown for aparticular security. According to the NBBO, the national best bid (NBB)is 122.20 on the ISE for 5000 shares and the national best offer (NBO)is 122.26 on the PHLX for 10,000 shares. At 904, Dark Trading FacilityOrder No. 1, which is a sell order for 5000 shares at a price of 122.26with no MTV, is shown. At 906, Securities Exchange DBK Order No. 1,which is a sell order for 5000 shares at a price of 122.26, is shown. At908, the PHLX Order is shown, which is a sell order for 10,000 shares ata price of 122.26. At 910, Dark Trading Facility Order No. 2 that hasbeen newly entered on Dark Trading Facility 102 is shown, which is a buyorder for 5000 shares at a price of 122.26 with no MTV. From this set oforders and the NBBO, Dark Trading Facility 102 will allocate nothing tothe protected quotes of away markets, 5000 shares to the securitiesexchange DBK, and nothing for trading within the Dark Trading Facility.

In greater detail, Dark Trading Facility Order No. 2 will send 5000shares to the securities exchange DBK at 122.26 ISO IOC. Dark TradingFacility Order No. 2 will execute a trade of 5000 shares with DarkTrading Facility Order No. 1 at 122.26. There will be nothing inresidual shares to return to the Dark Trading Facility for filling theDark Trading Facility Order No. 1 or for routing to the away markets tofill the PHLX Order.

In situations in which contra side liquidity in the Dark TradingFacility system database is priced better than the price quoted on thesecurities exchange DBK, a newly entered Dark Trading Facility orderwill execute against the contra side liquidity in the Dark TradingFacility system database in price/time priority to the fullest extentpossible, then it would be sent to the securities exchange DBX. Evenfurther, a newly entered Dark Trading Facility order may be executed inthe Dark Trading Facility without interacting with the securitiesexchange DBK when the price of the Dark Trading Facility Order is withinthe NBBO and at a price that is better than all of the orders for thatsecurity on the securities exchange DBK. Referring to FIG. 10, adescription of the operation of the Dark Trading Facility when the DarkTrading Facility has the best price will be provided.

Referring to FIG. 10, generally at 1000, an exemplary NBBO and a set oforder information is provided for describing the operation of the DarkTrading Facility when the Dark Trading Facility has the best price. At1002, the NBBO is shown for a particular security. According to theNBBO, the national best bid (NBB) is 122.20 on the ISE for 5000 sharesand the national best offer (NBO) is 122.26 on the PHLX for 5000 shares.At 1004, Dark Trading Facility Order No. 1, which is a sell order for5000 shares at a price of 122.25 with no MTV, is shown. At 1006,Securities Exchange DBK Order No. 1, which is a sell order for 5000shares at a price of 122.27, is shown. At 1008, the PHLX Order is shown,which is a sell order for 5000 shares at a price of 122.26. At 1010,Dark Trading Facility Order No. 2 that is a newly entered order on DarkTrading Facility 102 is shown, which is a buy order for 100,000 sharesat a price of 122.25 with no MTV. From this set of orders and the NBBO,Dark Trading Facility 102 will allocate nothing to the protected quotesof away markets, nothing to the securities exchange DBK, and 5000 shareswill be traded within the Dark Trading Facility.

In detail, Dark Trading Facility Order No. 2 will trade 5000 shareswithin Dark Trading Facility to fill Dark Trading Facility Order No. 1at 122.25. The remaining 95,000 shares will be posted in the DarkTrading Facility system database at 122.25 for later trading orcancellation (if IOC). Because the prices for the securities exchangeDBK and away markets shares are higher, the Dark Trading Facility OrderNo. 2 will not trade against these share amounts.

In the operation of Dark Trading Facility 102 when two Dark TradingFacility orders are marketable against each other and there is nomarketable contra side liquidity on the securities exchange DBK or onother away markets, and the prices cross, the Dark Trading Facility willcalculate the price for execution of the trade at the price nearest toor at the midpoint of the NBBO. Referring to FIGS. 11A and 11B, examplesof crossing orders will be described.

Referring to FIG. 11A, generally at 1100, an exemplary NBBO andrepresentative orders are provided for describing the operation of theDark Trading Facility when orders cross in the Dark Trading Facility. At1102, the NBBO is shown for a particular security. According to theNBBO, the national best bid (NBB) is 20.00 on the PHLX and the nationalbest offer (NBO) is 20.05 on the ISE. The NBBO midpoint is 20.025. At1104, Dark Trading Facility Order No. 1, which is a buy order for 50,000shares at a price of 20.02 with a MTV of 20,000 shares, is shown. At1106, Dark Trading Facility Order No. 2 is shown, which is a sell orderfor 100,000 shares at a price of 20.00 with a MTV of 20,000 shares. Asis seen, the buy and sell prices of these orders cross and are in theNBBO range. Therefore, from this set of orders and the NBBO, DarkTrading Facility 102 will execute a trade with an execution price of20.02, which is the price closest to the NBBO midpoint.

Referring to FIG. 11B, generally at 1120, an exemplary NBBO andrepresentative orders are provided for describing another example ofNBBO midpoint executions when orders cross in the Dark Trading Facility.At 1122, the NBBO is shown for a particular security. According to theNBBO, the national best bid (NBB) is 122.20 on the ISE for 5000 sharesand the national best offer (NBO) is 122.26 on the PHLX for 10,000shares. The NBBI midpoint is 122.23. At 1124, Securities Exchange DBKOrder No. 1, which is a sell order for 5000 shares at a price of 122.26,is shown. At 1126, Securities Exchange DBK Order No. 2 is shown, whichis a buy order for 5000 shares at a price of 122.20. At 1128, DarkTrading Facility Order No. 1, which is a sell order for 75,000 shares ata price of 122.22 with a MTV of 50,000 shares, is shown. At 1130, DarkTrading Facility Order No. 2 is shown, which is a buy order for 100,000shares at a price of 122.26 with a MTV of 50,000 shares Day. From thisset of orders and the NBBO, Dark Trading Facility 102 will allocate25,000 shares to securities exchange DBK, 75,000 shares within the DarkTrading Facility (since the MTVs of Dark Trading Facility Order Nos. 1and 2 will have been triggered), and nothing will be sent to the awaymarkets.

Reviewing this allocation in greater detail, Dark Trading Facility OrderNo. 2 will send 25,000 shares to securities exchange DBK at 122.26. DarkTrading Facility Order No. 2 will execute a trade of 75,000 shareswithin Dark Trading Facility to fill Dark Trading Facility Order No. 1at 122.23, the NBBO midpoint. Dark Trading Facility Order No. 2 willexecute a trade with Securities Exchange DBK Order No. 1 for 5000 sharesat 122.26. The unfilled balance of 20,000 shares of the Dark TradingFacility Order No. 2 will be posted in the Dark Trading Facility at122.26 with a new MTV of 20,000 shares.

There can be circumstances in which a new order enters the securityexchange market that will change the NBBO. Preferably, Dark TradingFacility 102 will process and execute these new orders in the samesequence as described previously until the close of the regular tradingsession of the securities exchange. At this time, all remaining orderswill be canceled back to the Training Facility users.

Preferably, the Dark Trading Facility will accept orders with round lotsor PRLs, and reject odd lot orders. However, it is understood that theDark Trading Facility could be configured to accept odd lots and stillbe within the scope of the present invention.

Dark Trading Facility 102 is preferably configured not to operate withregard to pricing increments smaller than $0.01 if the bid or offer, ororder is priced equal to or greater than $1.00 per share. Further,preferably, Dark Trading Facility 102 will not be configured to operatewith regard to increments smaller than $0.0001 if the bid or offer, ororders is priced less than $1.00 per share. However, it is understood byone skilled in the art that Dark Trading Facility can be configured tooperate without these constraints and still be within the scope of thepresent invention.

Preferably, Dark Trading Facility 102 will not accept Dark TradingFacility taking orders priced below $1.00. Moreover, preferably DarkTrading Facility execution prices will be calculated to only the thirddecimal when the NBBO is an odd penny spread and the trade price isgreater than $1.00. Again, however, it is understood by one skilled inthe art that Dark Trading Facility can be configured to operate withoutthese constraints and still be within the scope of the presentinvention.

It is understood that that the details of each Dark Trading Facilitytrade may be automatically matched and compared by the security exchangeand will be submitted for clearing and settlement, e.g., on a lock-inbasis. The method of clearing and settlement may be conventional exceptwith respect to the anonymous treatment of trades in the Dark TradingFacility. As such, the Dark Trading Facility transaction reportspreferably will indicate the details of the transaction but not disclosethe contra party's or the clearing firm's identity.

The terms and expressions which are used herein are used as terms ofexpression and not of limitation. And, there is no intention, in the useof such terms and expressions, of excluding the equivalents of thefeatures shown and described, or portions thereof, it being recognizedthat various modifications are possible in the scope of the invention.

The invention claimed is:
 1. A computer-based system for integrating acomputer-based electronic securities exchange and a computer-based darktrading facility (DTF) into a single computer-based electronicmarketplace for providing DTF system users access to the computerizedelectronic securities exchange and securities exchange system usersaccess to the computer-based DTF, comprising: the single computer-basedelectronic marketplace including at least, (a) a DTF computer processorbeing configured to connect to an electronic securities exchangeprocessor of the computer-based electronic securities exchange, andaccessed by securities exchange system user electronic input devicesthrough the electronic securities exchange processor and accessed by DTFsystem user electronic input devices for entering buy and sell orders inthe DTF computer processor for trading, with the DTF computer processorhaving, (1) a first interface configured for connecting the DTF computerprocessor to a plurality of DTF system user electronic input devices,with the first interface configured for receiving and processing buy andsell orders submitted to the DTF computer processor by DTF system userelectronic input devices, (2) a second interface configured forconnecting the DTF computer processor and the electronic securitiesexchange processor, with the second interface configured for receivingand processing the order information from the electronic securitiesexchange processor for displayed and non-displayed orders in an orderbook for buy and sell orders input from a plurality of securitiesexchange system user electronic input devices, and transmitting andprocessing contra side buy and sell orders posted or stored on a DTFelectronic database for executing trades with listed buy and sell ordersfor displayed and non-displayed orders in the order book, (3) the DTFelectronic database configured for posting and storing buy and sellorders received from DTF system user electronic input devices, (4) amatching engine configured for simultaneously viewing the DTF electronicdatabase and order information for displayed and non-displayed orders inthe order book and for executing trades between contra side buy and sellorders posted and stored in the DTF electronic database if a contra sidebuy and sell order is not first identified and matched in the DTFelectronic database, and determining from order information transmittedfrom the electronic securities exchange processor to the DTF computerprocessor trading opportunities between listed buy and sell orders fordisplayed and non-displayed orders in the order book and contra side buyand sell orders posted and stored in the DTF electronic database, and(5) an order router configured for routing to the electronic securitiesexchange processor for executing trades contra side posted or stored buyand sell orders in the DTF electronic database determined by thematching engine from order information to be trading opportunities withlisted buy and sell orders for displayed and non-displayed orders in theorder book listed on the computer-based electronic securities exchange;and (b) the electronic securities exchange processor configured toconnect to the DTF computer processer and for receiving and listing inthe order book that includes displayed and non-displayed buy and sellorders for securities entered on the computer-based electronicsecurities exchange by a plurality of securities exchange system userelectronic input devices and executing trades between contra side buyand sell orders for securities according to predetermined trading rulesof the computer-based electronic securities exchange.
 2. The system asrecited in claim 1, wherein the non-displayed orders for listed buy andsell orders for securities include reserve orders.
 3. The system asrecited in claim 1, wherein the computer-based electronic securitiesexchange includes a listing of other automated trading centers, whichlisting may include zero or more other automated trading centers.
 4. Thesystem as recited in claim 1, wherein inputs to the DTF system userelectronic input devices include inputs from securities traders.
 5. Thesystem as recited in claim 4, wherein securities traders includebroker-dealers, electronic communications networks, alternative tradingsystems, or electronic securities exchanges.
 6. A computer-implementedmethod for integrating a computer-based dark trading facility (DTF) andan computer-based electronic securities exchange to form a singleelectronic marketplace for providing DTF system users access to thecomputerized electronic securities exchange and securities exchangesystem users access to the computer-based DTF, comprising the steps of:(a) electronically transmitting from DTF system user electronic inputdevices to a DTF computer processor buy and sell orders; (b) determiningthat contra side buy and sell orders are matched in the DTF electronicdatabase, and upon determining that a countryside buy and sell order isnot identified and matched in the DTF database, posting and storing suchbuy and sell orders in a DTF electronic database; (c) electronicallytransmitting from the computer-based electronic security exchange to theDTF computer processor buy and sell order information regarding listedbuy and sell orders for displayed and non-displayed orders in an orderbook on the electronic security exchange from a plurality of securitiesexchange system user electronic input devices; (d) the DTF computerprocessor simultaneously viewing the DTF electronic database and orderinformation for displayed and non-displayed orders in the order book fordetermining trading opportunities between listed buy and sell orders fordisplayed and non-displayed orders in the order book and contra side buyand sell orders posted or stored in the DTF electronic database; (e) theDTF computer processor electronically transmitting contra side buy andsell orders posted or stored in the DTF electronic database determinedat step (d) from the DTF to the electronic securities exchange forexecuting trades; and (f) executing trades between contra side buy andsell orders transmitted at step (e) and listed buy and sell orders fordisplayed and non-displayed orders in the order book.
 7. The method asrecited in claim 6, wherein step (c) further includes electronicallytransmitting to the DTF computer processor order information with regardto buy and sell orders from other automated trading centers listed onthe electronic securities exchange, which listing of other automatedtrading centers may include buy and sell order information with regardto zero or more other automated trading centers.
 8. The method asrecited in claim 7, wherein step (d) further includes the DTF computerprocessor determining from the order information trading opportunitiesbetween buy and sell orders listed in the electronic securities exchangefor other automated trading centers and contra side buy and sell ordersposted or stored in the DTF electronic database.
 9. The method asrecited in claim 8, wherein the method further includes (g)electronically transmitting from the DTF computer processor toapplicable other automated trading centers contra side buy and sellorders posted or stored in the DTF electronic database determined by theDTF computer processor to be trading opportunities with the buy and sellorders on such applicable other automated trading centers and executingtrades between contra side buy and sell orders posted or stored in theDTF electronic database and buy and sell orders on such applicable otherautomated trading centers.
 10. The method as recited in claim 9, whereinthe DTF computer processor determining if the predetermined minimumcontra side share value is met includes the DTF computer processorcalculating a number of potentially available contra side shares listedas displayed and non-displayed orders in the order book for suchspecific posted or stored buy or sell order in the DTF electronicdatabase.
 11. The method as recited in claim 9, wherein the DTF computerprocessor determining if the predetermined minimum contra side sharevalue is met includes the DTF computer processor calculating anaggregate of a number of potentially available contra side shares listedas displayed and non-displayed orders in the order book and posted orstored in the DTF electronic database for such specific posted or storedbuy or sell order in the DTF electronic database.
 12. The method asrecited in claim 9, wherein the DTF computer processor determining ifthe predetermined minimum contra side share value is met includes theDTF computer processor calculating an aggregate of a number ofpotentially available contra side shares listed as displayed andnon-displayed orders in the order book, posted or stored in the DTFelectronic database, and on other automated trading centers for suchspecific posted or stored buy or sell order in the DTF electronicdatabase.
 13. The method as recited in claim 6, wherein trade executionreporting includes a unique recording designation for trades executed bythe DTF computer processor.
 14. The method as recited in claim 6,wherein trades executed at step (ef) include anonymous trades.
 15. Themethod as recited in claim 6, wherein trades executed at step (ef)include automatically executed trades.
 16. The method as recited inclaim 9, wherein trades executed at step (fg) include anonymous trades.17. The method as recited in claim 9, wherein trades executed at step(fg) include automatically executed trades.
 18. The method as recited inclaim 6, wherein inputs to the DTF system user electronic input devicesinclude inputs from securities traders.
 19. The method as recited inclaim 18, wherein securities traders include broker-dealers, electronicscommunications networks, alternative trading systems, or electronicsecurities exchanges.